How Human Resource Managers can deal with Difficult Employees
Introduction One of the key challenges that HR (Human Resource) Managers face in any organization is how they respond to employees violating organizational policies and plain disgruntled employees who are angry with their appraisals and consequent pay hikes and bonuses. Indeed, how astutely and adroitly the HR Managers deal with such employees determines their competency […]
5 Factors in Selecting an Affiliate Program
As an affiliate, one of the first major decisions that need to be made is selecting an affiliate program. This program then forms the basis of all the time and money that the affiliate would spend trying to generate a sustainable income. You cannot win too often if the playing field is unfavorable! Choosing the […]
Retention Strategies – Definition and its Components
Any employee retention strategy would necessarily include a plan for redressing employee grievances and ways and means to address employee issues. This would mean that the employees would be enabled to take their issues regarding pay, their work, their role etc. to the HR manager for each division and expect to get a fair hearing […]
The Use of Enterprise Resource Planning Applications in Finance and HRM
The Importance of ERP Software In previous articles on Finance and Human Resource Management, we discussed how the finance and HRM functions have evolved to become important support functions in organizations and not just appendages to the core processes of the organization. For instance, in earlier decades when manufacturing was predominant, finance and HRM were […]
Famous Cases of Hyperinflation
The common perception amongst lay people is that hyperinflation is the economic equivalent of a doomsday. True, that the consequences are dire and the threats are real. But this sort of stuff almost never happens, does it? This is the opinion that the common public holds when they are confronted with the issue of hyperinflation. […]
Leaders all over the world are upset with America’s hegemonic behaviour. In the past two years, Trump’s policies have caused uncalled for damage to the economies of many countries. This has been done by unnecessary trade wars and sanctions. Iran is one such country which is facing American sanctions.
The opinion of the European leaders seems to have changed. They are now silently protesting America’s unilateral exit from the deal that these same European leaders had cobbled up with so much difficulty. America entered into the nuclear accord with Iran in 2016 under Barack Obama. Donald Trump repealed the deal unilaterally in 2018.
This is leading to crippling economic effects on the Iranian economy. It is also causing a lot of economic mayhem in Europe. This is the reason why European governments have created “Instex.” This is a new system which is being designed to allow European businesses to conduct trade with Iran without violating America’s sanctions.
America’s sanctions work because of the hegemony that the United States has over the world financial system. Since the financial system is controlled by the United States, every major financial entity has to deal with US-based institutions. For instance, banks all over the world have to deal with their American counterparts for raising money or for transferring funds.
Hence, if America blocks the access of other banks to American banks, the business of these other international banks will suffer. This is the reason that when America levies sanctions on a country, its financial system is completely destroyed. For instance, now there might be many European companies who might be willing to sell to Iran. However, none of the European banks will undertake financial transactions with Iran because they may be afraid of punitive actions by the American government.
When America and Iran signed the nuclear deal, other nations like Germany, Britain, and France were also signatories to the deal. Since then Iran has not violated the deal, but America has called it off unilaterally. This is the reason why these countries have now decided to sidestep the American system.
Instex is a payment system which works like barter. Instex stands for Instrument in Support of Trade and Exchange. The basic premise of Instex is that there should be no cross border payments between Iran and the European Union. For instance, if Supplier A in Europe sells to customer B in Iran, the B owes money to A. Similarly, there might be supplier C based in Iran who has sold products to customer D in Europe.
Under normal circumstances, B would pay A and D would pay C. However, Instex will facilitate the payment in such a manner that D would pay A and B would pay C. Basically, the customer in Iran will pay the vendor in Iran. At the same time, the customer in Europe will pay the vendor in Europe. Therefore, there will be no cross border transactions. Since no money has been transferred across borders, the sanctions are not violated. Instex is a mechanism developed by European countries to circumvent the American sanctions without taking them head-on.
When the pattern on transactions that will happen on Instex are studied, a couple of shortcomings emerge. Firstly, it wouldn’t be possible to have unbalanced trading if Instex is used as a payment medium. This is because the monetary value of goods sold by European vendors will have to match the monetary value of goods purchased by European customers so that the amounts can be set off.
In order to find buyers and sellers to offset trades, a large number of intermediaries have to be available on the platform. This is only possible is Instex is supported by major European powers. Right now, this seems to be the case. The Instex system is set up in France, it is managed using German governance and enjoys the complete support of Britain. These are the three major economic powers present in Europe at the moment. These three countries are also trying to rally other 28 European countries to support the Instex system are start using it. The more people use Instex, the more powerful it will become since it is based on the principle that people in a network tend to have complementary needs.
Most large corporations based in Europe will try to stay away from the Instex system. This is because even though it is not violating the American sanctions in letter, it is certainly violating the same in spirit. Big European countries have business relations with America and hence would not want to be caught in the crossfire.
Small companies and traders, on the other hand, would have no such qualms. This the reason why Instex is supposed to start trading in products such as medical and farm supplies. Other humanitarian aid will also be covered by this platform. However, for the moment, Instex is likely to stay away from oil which forms the bulk of Iran’s foreign exchange. However, over time, as the usage of the platform is increased, oil may also find its way into the system.
Overall, Instex is a system created by European governments who are fed up of America unilaterally making a dent in their economy. America’s highhandedness is now likely to cost its economy dearly.
Your email address will not be published. Required fields are marked *
What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
